Loading judgment…
Facts
The assessee, Rallis India Limited, engaged in agrochemicals and agri services, filed its return of income for AY 2022-23. The CPC made an adjustment of Rs. 1284.66 crores on account of ICDS, significantly higher than the assessee's suo motu adjustment. The assessee contested this adjustment through rectification and appeals.
Held
The Tribunal held that the adjustment made by the CPC was unsustainable as it was made without a show cause notice. Furthermore, a Hon'ble High Court had quashed the intimation containing this ICDS adjustment. Therefore, the consequential addition made in the assessment order under Section 143(3) must be deleted.
Key Issues
Whether the addition of Rs. 1284.66 crores on account of ICDS adjustment by the CPC was valid and whether the assessment order under Section 143(3) could sustain this addition after the High Court quashed the intimation under Section 143(1)(a).
Sections Cited
143(1), 143(1)(a), 143(2), 143(3), 154, 134B, 134C, 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
(Assessment Year: 2022-23) M/s. Rallis India Limited Dy. CIT, Circle 8(1)(1) Room No. 624, 6th Floor, C/o. Kalyaniwalla and Mistry LLP, 2nd Floor, Esplanade House, Aayakar Bhavan, M. K. Road, Vs. 29, Hazarimal Somani Marg, Mumbai-400 020 Fort, Mumbai-400 001 PAN/GIR No. AABCR 2657 N (Appellant) : (Respondent) Appellant by : Shri Percy J Pardiwalla and Shri Jeet Kamdar Respondent by : Shri Umashankar Prasad Date of Hearing : 09.02.2026 Date of Pronouncement : 11.02.2026 O R D E R Per Saktijit Dey, Vice President: Captioned appeal by the assessee arises out of the order dated 27.09.2025, passed by National Faceless Appeal Centre (‘NFAC’ for short), Delhi for the assessment year (A.Y. for short) 2022-23.
Though, the assessee has raised multiple grounds, however, the core issue arising in appeal relates to addition of an amount of Rs.1284.66 crores on account of adjustments under Income Computation and Disclosure Standards (‘ICDS’ for short).
Relevant facts necessary for deciding this issue are, the assessee is a resident corporate entity stated to be engaged in the business of manufacturing and trading of agro chemicals-pesticides and plant nutrients, manufacturing and trading in seeds and soil
M/s. Rallis India Limited vs. Dy. CIT conditioners and providing agri services. For the assessment year under dispute, the assessee filed its return of income on 25.11.2022, declaring total income of Rs.232,26,45,090/-. While computing the total income, the assessee suo motu added back an amount of Rs.84,65,69,060/-, including an amount of Rs.1,15,08,630/- towards ICDS adjustment. While processing the return of income filed by the assessee u/s. 143(1) of the Act, the Centralized Processing Centre (CPC) issued a show cause notice proposing three adjustments to the income returned. However, in the intimation issued u/s. 143(1) of the Act, the CPC made adjustment of an amount of Rs.1284.66 crores on account of ICDS effect, as against adjustment of Rs.1,15,08,631/- made by the assessee. As a result, the total income was determined at Rs.1515,81,25,530/-. Contesting the adjustment so made by CPC, the assessee moved an application u/s. 154 of the Act, seeking rectification of the mistake.
Further, the assessee also filed an appeal against the intimation issued u/s. 143(1) of the Act, making the adjustment. During the pendency of the rectification application before the CPC as also the appeal before ld. first appellate authority, the Assessing Officer (A.O. for short) initiated scrutiny assessment proceedings by issuing a notice u/s. 143(2) of the Act. In response to the said notice, the assessee furnished a written submission, stating that the adjustment made by the CPC on account of ICDS effect should be deleted while completing the assessment u/s. 143(3) of the Act, as the intimation issued u/s. 143(1) of the Act merges with the assessment order passed u/s. 143(3) of the Act. However, while completing the assessment u/s. 143(3) of the Act, the A.O., while computing the total income, maintained the income as computed u/s. 143(1)(a) of the Act which included ICDS adjustment of Rs.1284.66 crores made by the CPC.
M/s. Rallis India Limited vs. Dy. CIT 5. Against the assessment order so passed u/s. 143(3) of the Act, the assessee preferred an appeal before ld. First appellate authority. In course of first appellate proceedings, the assessee again furnished a written submissions pointing out the mistake committed by CPC while making the adjustment in dispute and submitted that mistake so committed by CPC should have been rectified by A.O. while completing the assessment u/s. 143(3) of the Act.
Ld. First appellate authority, however, did not find the contentions of the assessee acceptable, observing as under: 8. Ground nos. 2 to 5 is regarding adjustment of Rs.1284.66 crores This ground is regarding adjustment made in the total income vide order passed u/s. 143(1)(a) of the Act. An adjustment was made for increase in profit on account of ICDS at Rs.1284.66 crores as against Rs.1.15 crores reported by the Appellant. The instant appeal is however filed against the assessment order dated 26.03.2024 passed u/s. 143(3) of the Act wherein all the contentions of the appellant in respect of issues selected under CASS scrutiny were accepted by the A.O. The grounds raised
by appellant are in respect of adjustment made in 143(1)(a) order dated 29.07.2023. Since, the current appeal is filed against assessment order dated 26.03.2024 and not against order u/s. 143(1)(a) dated 29.07.2023, therefore, any issue arising out of the 143(1)(a) order cannot be decided upon in this appeal order as this forum lacks jurisdiction and issue falls outside the statutory boundaries. The grounds therefore stand dismissed with liberty to the appellant to file an appeal against the order dated 29.07.2023 passed u/s. 143(1)(a) of the Act.
7. Shri Percy J Pardiwalla, ld. Counsel appearing for the assessee submitted that the adjustment made by the CPC, in the first place was unsustainable, as there was no show cause issued by the CPC proposing such adjustment in terms with the proviso to section 143(1) of the Act. He submitted, the CPC could not have made the adjustment without issuing a show cause. He submitted, even otherwise also the adjustment made by the CPC on account of ICDS is under a factual misconception, hence, should have been rectified. He submitted, in course of scrutiny assessment proceedings u/s. 143(3) of the Act, though, the issue relating to such mistake was brought to the notice of the A.O., however, he totally ignored the submissions of the assessee. He submitted, even the first appellate authority committed gross error in rejecting assessee’s contention on the reasoning that the adjustment made in an intimation u/s. 143(1)(a) of the Act could not be dealt in an appeal
M/s. Rallis India Limited vs. Dy. CIT arising out of the assessment order passed u/s. 143(3) of the Act. He submitted, since upon initiation of proceedings u/s. 143(3) of the Act, the intimation issued u/s. 143(1)(a) of the Act merges with the assessment order passed u/s. 143(1) of the Act, that is the only substantive assessment order in existence, the first appellate authority should have dealt with the issue on merits. He submitted, while considering the writ petition filed by the assessee challenging the adjustment made by the CPC on account of ICDS effect in the intimation u/s. 143(1) of the Act, the Hon'ble Jurisdictional High Court, in judgement dated 19.01.2026, has quashed the intimation u/s. 143(1) of the Act qua the ICDS adjustment of Rs.1284,66,97,880/-. Thus, he submitted, corresponding addition made in the order passed u/s. 143(3) of the Act on account of such adjustment has to be deleted.
The ld. Departmental Representative (ld. DR for short) submitted, since the ICDS adjustment was made by the CPC while processing the return of income u/s. 143(1)(a) of the Act, it gives rise to a separate cause of action, hence, could not have been challenged in an appeal preferred against the assessment order passed u/s. 143(3) of the Act, wherein the A.O. has included such adjustment only for computational purpose. However, he fairly submitted that since the Hon'ble High Court has quashed the intimation issued u/s. 143(1)(a) of the Act making such adjustment, consequential effect needs to be given to the income computed by the A.O. in the assessment order passed u/s. 143(3) of the Act.
We have considered rival submissions and perused the materials on record. Undisputedly, while processing the return of income u/s. 143(1)(a) of the Act, the CPC had made an adjustment of Rs.1284,66,97,880/- on account of ICDS effect, as against the suo motu adjustment of Rs.1,15,08,630/- made by the assessee. Undisputedly, while computing the income of the assessee in the assessment order passed u/s. 143(3) of the Act, the A.O.
M/s. Rallis India Limited vs. Dy. CIT had incorporated the income computed by the CPC in the intimation issued u/s. 143(1)(a) of the Act which included the ICDS adjustment in dispute. Fact remains, in a Writ Petition filed in the Hon'ble Jurisdictional High Court, the assessee had challenged the intimation issued u/s. 143(1)(a) of the Act by CPC making ICDS adjustment in dispute. While disposing of the Writ Petition registered as Writ Petition (L) No. 37314 of 2025, the Hon'ble Jurisdictional High Court in judgement dated 19.01.2026 had quashed the intimation issued u/s. 143(1)(a) of the Act by CPC making the ICDS adjustment of Rs.1284,66,97,880/-. Thus, once the intimation u/s. 143(1)(a) of the Act incorporating the ICDS adjustment of Rs.1284.66 crores has been quashed by the Hon'ble Jurisdictional High Court, consequential effect relating to such adjustment is bound to be given in the computation of total income in the assessment order passed u/s. 143(3) of the Act.
In view of the aforesaid, we direct the A.O. to make necessary modification to the total income computed in the assessment order dated 26.03.2024 passed u/s. 143(3) r.w.s. 144B of the Act by deleting the ICDS adjustment of Rs.1284.66 crores made by the CPC. The grounds raised qua levy of interest u/s. 134B and 134C of the Act, being consequential in nature, do not require adjudication.
In the result, the appeal is allowed as indicated above. Order pronounced in the open court on 11.02.2026 Sd/- Sd/- (Makarand V Mahadeokar) (Saktijit Dey) Accountant Member Vice President Mumbai; Dated : 11.02.2026 Roshani, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER,
(Dy./Asstt. Registrar) ITAT, Mumbai